General Question

12Oaks's avatar

What happens to those college fund saving accounts if the intended decides not to go to college?

Asked by 12Oaks (4051points) February 17th, 2011

The odds seem for this to happen. Less than 25% of American adults have a college degree, so the means 75% either didn’t, or shouldn’t have, gone to college. I just wonder if it makes more sense to put that money into a dedicated account at your bank so you have more control over what is your money. So if the kiddo, at 17 or whatever, looks into it and decides against, you have a bankload of unearmarked money.

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3 Answers

WestRiverrat's avatar

Most programs have ‘opt out’ clauses that tell you how to get out of them, and what you need to do with the proceeds. Most of the college fund savings accounts are set up with pretax dollars, so there will likely be a substantial tax penalty at the least.

Most college fund accounts are also useable at trade and vocational training centers.

zenvelo's avatar

They are also transferable from one student to another. Check with the plan manager.

plethora's avatar

“School savings plans” set up under the Uniform Gifts to Minors Acts become fully vested in the child when the child reaches age 18’

However, such plans set up as a section 529 plan retain the original trustee, usually the donor, as the owner of the funds. The funds can be redirected to another beneficiary or withdrawn my the donor. Taxable consequences accrue to the latter option.

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